Wednesday, March 17, 2010

Employer Tax Breaks for New Employees To Stimulate Economy

On February 24, 2010, the U.S. Senate passed its version of the Hiring Incentives to Restore Employment Act (HIRE), also known as the Jobs bill. On March 4, 2010, the U.S. House of Representatives passed the Jobs bill with an amendment. The Jobs bill now goes back to the Senate for a vote on the amended version before being passed on to the President for signature. The President is expected to sign the bill into law upon passage by the Senate.

The Jobs bill is a plan to stimulate the economy through the creation of jobs by providing tax breaks to companies who hire the unemployed. The Jobs bill is designed to work as described as follows. HIRE will exempt an employer from paying the employer’s portion of the Social Security tax of an employee’s wage for the remainder of the year, when the company hires a previously unemployed worker. The exemption applies, retroactively, to individuals hired after February 3, 2010, through December 31, 2010.

The 6.2% portion of the Social Security tax would be exempt for any qualified individual hired after February 3, 2010, and before January 1, 2011, for wages paid in 2010 up to the Social Security ceiling of $106,800. Qualified employers may begin claiming this exemption on the second quarter 2010 Form 941.

A business will qualify for the tax credit and exemption if the new employee meets the following requirements:

o The new employee begins employment with a qualified employer after February 3, 2010, but before January 1, 2011;
o The new employee has not been employed for more than 40 hours in the previous 60 days; and
o The new employee is not hired to replace another employee, unless the former employee was separated from employment for cause or voluntarily.

It is important to note that the Social Security tax exemption is not an option if the employer selects the Working Opportunity Tax Credit (WOTC).

If you have questions about how you can best position your company to take advantage of the Jobs bill or if you have employment issues pertaining to your business, then contact Ronnie Gipson at (415) 655-6820 or through the firm’s website at www.higagipsonllp.com.